Consider the following information on large-company stocks for a period of years

Question

Consider the following information on large-company stocks for a period of years.

  Series

Arithmetic Mean

What was the arithmetic average annual return on large-company stocks in nominal terms? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

What was the arithmetic average annual return on large-company stocks in real terms? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

  Series

Arithmetic Mean

  Large-company stocks 15.1 %   Small-company stocks 16.4   Long-term corporate bonds 6.2   Long-term government bonds 6.1   Intermediate-term government bonds 5.6   U.S. Treasury bills 3.8   Inflation 4.9

Explanation / Answer

a. 15.1%

b, Real return = Nominal return - Inflation = 15.1% - 4.9% = 10.2%

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